Follow the Money: Indiana Income Tax Returns

Who wants to be a millionaire? More than 2,000 Indiana households could
tell you what it’s like. Out of the 2.9 million individual income
tax returns filed for 2001 with the Indiana Department of Revenue, 2,126
reported adjusted gross income (AGI) exceeding $1 million. Dropping the
bar to a paltry half-million dollars raises the number of tax returns
to 6,936.

Where are these well-heeled Hoosiers to be found? Not surprisingly,
the largest number of million dollar returns (387) were filed from the
state’s largest county, Marion. Other counties with more than 100
incomes over $1 million were Hamilton, Allen and St. Joseph. Lake County
almost made the list with 98 millionaire returns.

Of course, one does not need to be a millionaire to have substantial
buying power. Figure 1 compares Indiana counties on the percentage of
tax returns reporting incomes over $100,000. Hamilton County led this
list in 2001 (the most recent tax year for which data are available) by
a wide margin at 18.6 percent of its returns, followed by Boone County
at 12.3 percent. Altogether, 16 counties exceeded the state average of
5 percent of returns with incomes over $100,000. Of these, seven are in
the Indianapolis metro area.

At the lower end of the income distribution, in 10 counties the median
adjusted gross income calculated from tax returns was no more than about
85 percent of the Indiana median, which was $22,614. (Note: This figure
is not the same as the median household income reported by the Census
Bureau; this figure represents the adjusted gross income that is higher
than half of the incomes reported on individual income tax returns.) These
counties are shown in Table 1, along with the 10 counties with the highest
median adjusted gross incomes.

As shown in Figure 2, more than 30 percent of all Indiana returns reported
income of $10,000 or less, while 22.8 percent reported income exceeding
$50,000 in 2001.

The distribution of incomes is generally rather stable over time, with
a slight upward shift reflecting the gradual increase in average earnings
(income figures reported here are not adjusted for inflation). Comparing
Indiana individual income tax returns for 2001 with those filed for 1996
reveals a drop of 3.1 percentage points in the proportion of returns with
incomes in the $1 to $10,000 range and a corresponding drop of 1.9 points
in the $10,001 to $20,000 range. Over the same five-year period, the percentage
of Indiana returns reporting incomes over $50,000 increased by 4.3 points,
and the percentage of incomes over $75,000 increased by 3 points.

Figure 3 compares counties in terms of the five-year change in the percentage
of incomes over $50,000. Spencer, Boone and Warrick counties enjoyed a
change in incomes over $50,000 exceeding 7 percentage points, while counties
with increases less than 3 percentage points in the above-$50,000 brackets
were Delaware, Madison, Fayette, Porter and Grant.